Well Beyond Low Reserves Managing

NONE of today’s utilities should be allowed to take as inevitable a bare bones approach to increase efficiency, introducing a high leverage shake-up to the industry. Unlike traditional utilities, competitive Second Generation Retailers will have “end-to-end responsibility and be willing to have a stake in delivering results… ” to end-customers.

Well Beyond Low Reserves Managing

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 17th, 2008.

Copyright © 2008 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Under EWPC, NONE of the “… utilities will … take a bare bones approach…” that Capgemini sees as inevitable. Those utilities, which like dogs are unable to learn new tricks, insist in keeping a “bares bone” obsolete non competitive business model of winning rate cases to the regulator. That is an unnecessary risk taken by governments and the power industry that is solved under competition by the EWPC market architecture and design paradigm shift, under a NO jurisdiction left behind.

EWPC Retail Competition, to be done by Second Generation Retailers - 2GRs, involve business model innovations, which go well beyond managing peak demand or low generation, that reduces reserves, anytime, anywhere, by introducing everywhere a high leverage shake-up. For example, a High Leverage Shake-Up in California (please hit the link here and elsewhere to get to the corresponding article) is needed to repair the immense damage done to the worldwide power industry with the The BIG California LIE. The shake-up, however, can be initiated in wherever jurisdiction that wants to take the leadership that California has been unable to show so far.

In the article “COMPETITION RULES! TALK AMONGST YOURSELVES... ,” Martin Rosenberg quotes” four articulate CEOs”:

WE FACE HUGE, COMPLEX GLOBAL ENERGY CHALLENGES. COMPETITION UNLEASHES ALL THE POSSIBILITIES TO HELP SOLVE THESE CHALLENGES FOR OUR CUSTOMERS.

Jim Burke, CEO, TXU Energy

CUSTOMER FIRES ENERGY COMPANY.

Lois Hedge-Peth, COO, Direct Energy

COMPETITION DRIVES INNOVATION AND LOWER PRICES IN BOTH WHOLESALE AND RETAIL ENERGY MARKETS. PERVASIVE COMPETITION WILL ALLOW OUR INDUSTRY TO EFFECTIVELY ADDRESS THE MAJOR ISSUES INCLUDING CLIMATE CHANGE, NEED FOR NEW GENERATION INVESTMENTS AND GRID INVESTMENTS.

Michael Kagan, President, Constellation NewEnergy

THE POWER INDUSTRY HAS BY THE THE LOWEST CAPACITY UTILITIZATION RATE AMONG CAPITAL-INTENSIVE BUSINESSES, AND ONLY COMPETITIVE RETAIL MARKETS CAN END MORE THAN A CENTURY OF INEFFICIENCY.

Mark Jacobs, CEO, Reliant Energy

Capgemini defines “the electrical energy market” as that market that includes “… generators, system operators, transmission and distribution service providers, retailers, energy service companies, consumers, regulators and legislators…”

In response to another Capgemini article (see The Smart Grid Transportation Utility), I concluded that “Dramatic and radical change is coming to the electric utility industry as the utility itself evolves to the smart transportation grid, under a complete rethinking of the electric industry. Front and back office generation and customer facing activities become free market activities under prudential regulations.”

The system operators and the transmission and distribution service providers become the integrated (T&D) transportation utility under a compact with a responsibility of transport, instead of a responsibility to serve, in exchange for a regulated price control tolls payment. The “ability to earn a return on their investments in” the transportation infrastructure under traditional regulation is without any doubt. As “[T]he current state of the electrical infrastructure in North America is not sustainable…,” the paradigm shift to EWPC will enable a sustainable smart grid transportation utility electrical infrastructure in America and the rest of the world.

Under EWPC, the investments necessary for Demand Integration (no just smart metering) will be coordinated by Second Generation Retailers. The broader set of benefits of aggregating retail demand to produce wholesale demand, refining grid planning, and improving grid monitoring and control, are part of the Demand Integration processes to power system planning, operation and control.

Instead of an artificial decoupling of the utility grid and the utility enterprise, like that under structural separation of the grid and the enterprise that lead to a Complex and Ugly System (see The Good, the Bad and the Ugly), real decoupling is produced by having distribution integrated with transmission in the transportation utility compact leading to the Good and Simple System.

As they take on today’s utilities enterprise activities on a competitive basis, 2GRs integrate the functions of retailers, load serving entities, and aggregators, increasing the efficiency and effectiveness of the whole system. Unlike utilities, competitive 2GRs will have “end-to-end responsibility and be willing to have a stake in delivering results… ” to end-customers. So, paraphrasing the author, “… [2GRs will] look beyond the technology into the opportunities and incentives the technology unlocks. Indeed, [2Grs will] take a more comprehensive view of smart metering. More important than the technology itself is the role it plays in enabling system operators, 2GRs and customers to … improve market efficiency.” 2GRs “should seek out partners who will work collaboratively with them to ensure the success…” of their business models.

Reference and context: A Fresh Approach to Managing Peak Demand, by Gary Paul, VP, Outsourcing Business Development, Capgemini